IRS Tax Frequently Asked Questions

Put Richard Carpenter’s 30+ years of tax law experience to work for you.

Click on each question below for tips from our experts.

Why did my tax return get selected for audit?

A: Tax returns are selected for audit for several reasons.

The IRS believes your tax return has errors in it. The IRS uses a “Discriminant Function System” to grade tax returns for errors and compare them to each other. The higher a taxpayer’s “DFS” score, the greater their chance of being selected for audit. Most taxpayers get selected for audit because of their high “DFS” score.

Self-employed taxpayers also have a substantially higher chance of audit than those who receive a W-2 at work.

Taxpayers who claim losses on their tax returns get audited more frequently than others.

Some taxpayers get selected for audit solely because of who prepared their tax return. The IRS has determined that some tax preparers don’t follow the rules correctly and they select their clients very frequently for audit. Thus, your tax return could be selected for audit without any fault of you – simply because the IRS doesn’t like your tax preparer.

A small percentage of taxpayers are also randomly selected for audit – but this doesn’t happen too often.

If you are selected for audit by the IRS, please contact us before the audit begins. We will be able to review your income tax return and explain to you why your tax return was selected for audit and what steps should be taken to properly prepare for the audit. We have been representing taxpayers with IRS tax problem help for over 30 years.

My tax return just got selected for audit, shouldn't I just call my tax preparer to represent me at the IRS audit?

A: No, it is always best to have an experienced tax attorney, who did not prepare your tax return, represent you before the IRS, for these reasons:

Many tax preparers and/or CPAs have little or no experience representing taxpayers at IRS audits.

Before the audit begins, we can provide you with an independent review of your tax return and spot trouble audit areas that your tax preparer clearly missed already.

Some taxpayers get selected for audit solely because of who prepared their tax return. The IRS has determined that some tax preparers don’t follow the rules correctly and they select their clients very frequently for audit. In those instances, you certainly don’t want that tax preparer to represent you at the audit under any circumstances.

Using a tax attorney qualifies you for the attorney/client privilege – so anything you discuss with us remains confidential.

I haven't filed my income tax returns for several years - am I in big trouble?

A: It depends. If you have not filed your income tax returns for several years, you are not alone.

While this is a serious matter, and some high income taxpayers actually go to jail each year for non-filing of their tax return, for most taxpayers, it is not an insurmountable hurdle.

The first point you need to understand is if your income exceeds the minimum filing level set by the IRS, you are required to file an accurate income tax return each year. So if you have fallen behind with your income tax return filing, you should take immediate steps to correct this problem – especially if you have been ignoring letters from the IRS and/or CA Franchise Tax Board asking for your delinquent tax returns. You should contact an accountant to get these delinquent tax returns prepared ASAP, then contact us for IRS assistance and to get started on filing them for you.

I have fallen way behind in paying my business payroll taxes. How serious is this?

If you continue to ignore paying your payroll taxes, soon you will find the IRS and/or California EDD taking aggressive collection action against your small business – which may include: (i) levying on your business bank accounts to obtain their delinquent payroll tax money – causing you havoc when trying to pay your other bills, (ii) contacting your customers and demanding (via a levy) that they pay them directly instead of paying your business – leaving you with more cash flow problems, and (iii) filing a tax lien against your business.

The IRS and the California EDD can also take steps to personally hold you responsible for your company’s nonpayment of payroll taxes (called the Trust Fund Recovery Penalty). Even though your business is a corporation, that will not shield you from the IRS and California EDD coming after your personal assets. Not only is your business at risk, but so are your own personal assets – including your home. If you are in this situation – unpaid payroll taxes and/or unfiled payroll tax returns, it is very important that you immediately contact us to see how we can help you.

The IRS has just filed a federal tax lien against me, what does this mean?

A: A federal tax lien is a public record that you and/or your business owes the IRS money and anyone with internet access will be able to find this out.

Generally, if the IRS estimates that you will take more than 12 months to fully pay off your tax liability to them, they will routinely file a federal tax lien against you.

A federal tax lien will also hurt your ability to borrow money. In addition, if you are a small business that has fallen behind with paying your payroll taxes, your competitors can see that the IRS has filed a federal tax lien against you and they will know that your business is in serious financial trouble. If the IRS has filed a tax lien against you, we can help.

The IRS just levied my bank account. Why did this happen?

A: You must owe the IRS money and probably have been ignoring their previous letters for payment.

As you may have already heard, the Internal Revenue Code gives the IRS tremendous power to collect past due tax, interest and penalties from a late-paying taxpayer. Federal law allows the IRS to levy against a taxpayer’s wages, bank accounts, retirement plans, social security, escrow accounts and accounts receivable. The IRS also has the power to seize your assets and sell them off to pay outstanding amounts due. Note, the Internal Revenue Code does require the bank to hold the levied funds for 21 days before forwarding it on to the IRS – so if you act quickly, there is usually time to negotiate with the IRS for a levy release under appropriate circumstances. If you owe the IRS over $25,000 in back taxes, we can help you.

I owe the IRS a lot of money. I heard that the IRS only has a limited time in which to collect this delinquent tax from me. Is this true?

A: Yes, there is some good news if you owe the IRS money. The Internal Revenue Code does limit the time period in which the IRS can collect delinquent tax from you.

This is referred to as the statute of limitations on collections. In general, the IRS has 10 years to collect the tax from the date of assessment. This 10-year period can, however, be extended for various reasons. Also, if you haven’t filed a tax return, the collection statute generally doesn’t start running. If you owe the IRS over $25,000 in back taxes, please contact us.

I just received a phone call from an IRS Criminal Division Special Agent who said he wants to interview me. Should I go to meet with him?

A: Under no circumstances should any taxpayer speak with an IRS Criminal Division Special Agent, without first consulting with an experienced tax attorney.

All statements made by a taxpayer to an IRS Criminal Division Special Agent can be used against him or her in any subsequent court trial. By recognizing early on when there is a potential criminal tax problem, an experienced criminal tax lawyer has the best chance of arriving at a successful resolution. If you are facing a criminal tax matter, we can put our years of experience to help with any criminal tax matter.

Can't I simply represent myself when dealing with the IRS?

A: Yes, you can represent yourself when dealing with the IRS – but this isn’t a good idea.

IRS agents are specially trained in tax law and they deal with tax problems every day. On the other hand, you are not specially trained in tax law and you don’t deal with IRS tax problems every day. So, if you represent yourself, the IRS will have a clear advantage. To level the playing field, you truly need someone on your side for IRS representation who is knowledgeable in tax law and specially trained to be effective in negotiations with the IRS. Remember, the IRS Agent is representing the Government – not you. Most IRS Agents will take advantage of you if they sense that you don’t understand the rules. If you have an IRS tax problem, please contact us for assistance. We want to help you with your IRS tax problem and get you great results.

I have some foreign bank accounts that I have failed to disclose to the IRS. What should I do?

A: Under most circumstances, disclosing them now is the way to proceed. However, there are various different ways to do this. If you select the wrong method, you could subject yourself to very large penalties. We can assist you if you have previously failed to disclose your foreign bank account to the IRS. Please contact us, before the IRS catches you.

This third offshore program comes as the IRS continues working with the Justice Department to pursue criminal prosecution of international tax evasion. The current offshore voluntary disclosure program is similar to the 2011 program in many ways, but with some key differences. In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Participants must file all original and amended tax returns and include payment for back taxes and interest for up to eight years as well as paying certain set penalties.

I have decided to hire someone to represent me in dealing with the IRS. Why shouldn't I hire one of those "tax resolution firms" that I see advertising on the internet or on TV?

A: Don’t be fooled by those “tax resolution” companies who advertised on the TV, radio and/or the internet. Many of these “tax help firms” have thousands of consumer complaints.

1) The California Attorney General filed a $34-million-dollar lawsuit against the Sacramento based tax resolution law firm Roni Deutch. The Attorney General alleged that Tax Lady Roni Deutch “engaged” in a heartless scheme that swindled people with tax problems… she promises to significantly reduce their IRS tax debts… but providing little or no help.” Roni Deutch has now closed and left its clients stranded.

2) The Attorney General of Texas charged Tax Masters, a tax resolution firm, with multiple violations of the Texas Deceptive Trade Practices Act. According to their Attorney General, “a state investigation and nearly 1,000 customer complaints indicate that the defendants (Tax Masters) routinely misled customers about the nature of their tax resolution service agreements.” See the Attorney General of Texas website for additional details. Tax Masters has now filed for bankruptcy and left its clients stranded.

3) As reported by the Wall Street Journal, J.K.Harris, a South Carolina based tax resolution firm, was sued by the Attorney General from 18 different states after it was found that this company didn’t get consumers the tax relief it promised. According to the North Carolina Attorney General Roy Cooper, “many consumers paid J.K. Harris for tax help and got nothing but headaches in return.” The Massachusetts Attorney General Martha Coakley also stated that J.K. Harris “took advantage of people who paid for tax assistance and, in some instances, profited by taking their money and not giving them any help at all. J.K Harris has now closed and left its clients stranded.

Don’t be fooled by “tax resolution” law firms. If you have an IRS tax problem, we would love to help you. Please contact us. During the past 30 years, we have assisted thousands of clients resolve their tax disputes with the IRS and the State of California. We can help you too.

Why should I hire you?

A: There are several important reasons why you should hire us at IRS Tax Disputes to help resolve your tax problem. Please click here to read our approach.

Give us a call to schedule your free consultation: (619) 696-8607 OR send us a confidential email: RC@irstaxdisputes.com

We know that resolving a tax dispute requires skill. Because each case has its own unique set of facts, we will NEVER use a “one size fits all” approach. We look at each case as unique.